In a conference call, Mondavi said its profit for the fourth quarter could be as low as 39 cents a share, citing lower-than-expected overall sales along with higher costs of promoting its low-priced line of Woodbridge wines. Analysts expected the company to earn 55 cents a share, according to the consensus tracked by Zacks Investment Research. The company's fourth quarter ends in June.

Mondavi also said it expects to earn $1.83 a share in its 1998 fiscal year, below expectations of $1.99 a share. Fiscal year 1999 earnings are also expected to be hurt as the company said it would likely earn $2.05 a share in the coming fiscal year, down from the $2.20 analysts estimated.

Layoffs planned

Mondavi President Michael Mondavi, whose father founded the winery, said the company will lay off seven executives and "a few others" at the supervisor level. The money saved from those positions will be go toward increased sales and advertising, Mondavi said.

In the short-term, however, the layoffs will hurt earnings by 3 cents a share in its fourth quarter, the company said.

The company said its Woodbridge wine has sold well in large grocery-story chains in California, Texas and North Carolina. It has seen slower-than-expected sales, however, in smaller, "independent" markets.

Mondavi also said promotional programs for the wine, which give extra bottles for case purchases, would hurt profits slightly. "It's one of the arrows that helps you in certain markets," Mondavi said.

The company is moving to promote its products heavily through radio and newspaper advertising, Robert Philips of the company's investor relations department said. Mondavi had backed off advertising in the past few years because of a supply shortage, he said.

El Niño effect

Weather also was a factor. El Niño-driven storms packed a punch through Napa Valley last winter, slowing the growing season by three to five weeks, the company said. The summer harvest will be affected by the cool and wet spring but is expected to be normal to slightly smaller in size assuming the region stays dry, Mondavi said.

Another problem affecting Mondavi over the past few quarters has been a shortage of its Chardonnay wine. Mondavi said he didn't expect to run short on the wine again.

The company will release a new line of wine based off the Woodbridge line, which analysts speculated could confuse consumers who are just now seeing the label on the shelves again. Mondavi justified the new line by saying it would be marketed and packaged in a similar way to the Woodbridge product.

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